Wednesday, July 12, 2006

US Economy Doing Fine, Government Collecting More in Taxes

OpinionJournal - Soaking the Rich Once again tax cuts - correctly applied - have spurred both economic growth and tax revenues.

Growth in the economy is good for everyone.
Tax RevenueIn the 12 quarters--three full years--since the tax cut passed, growth has averaged a remarkable 4%. Monetary policy has also fueled this expansion, but the tax cuts were perfectly targeted to improve the incentives to take risks among businesses shell-shocked by the dot-com collapse, 9/11 and Sarbanes-Oxley.

This growth in turn has produced a record flood of tax revenues, just as the most ebullient supply-siders predicted. In the first nine months of fiscal 2006, tax revenues have climbed by $206 billion, or nearly 13%. As the Congressional Budget Office recently noted, "That increase represents the second-highest rate of growth for that nine-month period in the past 25 years"--exceeded only by the year before. For all of fiscal 2005, revenues rose by $274 billion, or 15%. We should add that CBO itself failed to anticipate this revenue boom, as the nearby table shows. Maybe its economists should rethink their models.
Democrats are complaining that this means a "windfall for the rich." As the WSJ says, some people are never happy. Look for a lot of Dems to worry about long-term obligations now.... especially since they refused to do anything about reforming those long-term obligations. (Social Security Reform, anyone?)

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